TORONTO - A recent report from Equifax (NYSE:EFX) Canada highlights a worrying trend in the country's financial health, revealing a sharp increase in consumer debt and credit delinquencies. The report indicates that amidst ongoing economic challenges, such as high inflation and rising interest rates, Canadians are facing a mounting debt burden.
The average credit card balance has risen to $4,119, showing a 3.4% increase as more consumers resort to making only the minimum payments. Total credit cards debt climbed to a new high of $113.4 billion in the third quarter of 2023, up 16% year over year.
Overall, the total consumer indebtedness in Canada has reached an unprecedented $2.4 trillion, marking an $80.9 billion jump from the previous year.
Rebecca Oakes from Equifax Canada has flagged a potential 'payment shock' for many Canadians who will be renewing their mortgages at considerably higher rates. This comes at a time when household expenses, including housing costs, are escalating due to inflation.
Mark Kalinowski also points out that low-income earners are increasingly dependent on credit cards to cover basic necessities, emphasizing the urgency for structured repayment strategies to manage this growing reliance on credit.
The delinquency data presents a grim picture: one out of every 25 Canadians is now missing payments. Non-mortgage delinquencies have surged by 29.2% since last year, reaching a rate of 1.2%. Particularly concerning are auto loan defaults and Ontario's mortgage delinquency rates, which have risen by 4.6% above pre-pandemic levels.
Financial experts warn that the economic strain is likely to continue exerting significant stress on borrowers. They highlight the critical need for those struggling with debt to seek advice and support from financial institutions to help navigate these repayment challenges effectively.
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